Bill Mundell: California’s choices not just ‘tax or cut’

June 2, 2012

Pity poor Gov. Jerry Brown. The challenges he is responsible for resolving are not of his making. But when he threatens deeper cuts to services if voters don’t pass his tax-increase measures, then it is definitely his mistake. It is a big mistake because he wants to solve new problems with old ideas. This has never worked.

Caught between a rock and a hard place, Gov. Brown is saying “choose the rock.” But the alternative is no better. With the state budget deficit growing to $16 billion from $9 billion, tax increases or cuts in services are both bad medicine.

There are a myriad of reasons why the deficit has increased over time, not the least of which is the state of the national economy.

We all have a share of responsibility to accept; no one is entirely blameless. That doesn’t mean that everybody should go to hell in a handbasket. In fact, nobody should.

The ongoing game of mudslinging is only about who should lose more. Tax increases hit the rich (who are the ones who can invest); cuts in services hurt the less-fortunate (who are already badly off).

The real game should be to get everybody to win. We have to think out of the box.

Is California poor? No, the state is very rich. It has land, territory and it is home to the best and most innovative companies in the world – Apple, Facebook, Google – brands that are larger than many states. It is home to the one place producing dreams and imagination for the whole world, Hollywood.

We feel California’s richness when we walk the streets, when we look around at our forests, our cities, our parks, our incredible beaches and the creativity of our people. How can we translate this feeling into hard reality?

Let’s produce a balance sheet. Let’s see what are the real assets of California. I believe they are worth hundreds of billions of dollars. Once we have a balance sheet, things start changing immediately, just like it would for a person with a debt of $1,000 who discovers he has assets worth $1 million.

Once the financial markets see that California is not bankrupt, that its assets are worth much more than its debts, then the state’s interest payments, contributing to the deficit, will go down. With a balance sheet for the state, we can decide what to do practically: sell some assets, keep them, sell minority interest in them, create a California enterprise fund. We would now have a way out rather than being stuck with the blackmail of more taxes or more cuts in spending.

Knowledge is power. And power should reside with the people who are entitled to learn what they own and then can decide what to do with it. It is the fiduciary responsibility of the state to tell us what we own, to give us a real choice.

An old Christian sage said, “In thinking badly one goes to hell, but one is almost always right.” Do Gov. Brown and his people not want a balance sheet because hiding state properties from public scrutiny gives them power without responsibility?

If an entrepreneur starts an operation, he puts his money in it, and, if it goes wrong, he loses his shirt. But does bad administration of state assets make any bureaucrat lose anything? Of course not. But if things go well… then some could find ways to benefit. It is the economy of old communist or fascist countries: Benefits are private, losses are social.

Is Gov. Brown aware of this, or is he just distracted by the game of rocks and hard places? If not, Governor, then, please, give us the balance sheet.